Since everyone's been huffing and puffing so much about my recent posts, here's something to help y'all chill...:-)
July 13, 2008
Everybody’s Business
Lessons in Love, by Way of Economics By BEN STEIN
AS my fine professor of economics at Columbia, C. Lowell Harriss (who just celebrated his 96th birthday) used to tell us, economics is the study of the allocation of scarce goods and services. What could be scarcer or more precious than love? It is rare, hard to come by and often fragile.
My primary life study has been about love. Second comes economics, so here, in the form of a few rules, is a little amalgam of the two fields: the economics of love. (I last wrote about this subject 20 years or so ago, and it’s time to update it.)
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In general, and with rare exceptions, the returns in love situations are roughly proportional to the amount of time and devotion invested. The amount of love you get from an investment in love is correlated, if only roughly, to the amount of yourself you invest in the relationship.
If you invest caring, patience and unselfishness, you get those things back. (This assumes, of course, that you are having a relationship with someone who loves you, and not a one-sided love affair with someone who isn’t interested.)
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High-quality bonds consistently yield more return than junk, and so it is with high-quality love. As for the returns on bonds, I know that my comment will come as a surprise to people who have been brainwashed into thinking that junk bonds are free money. They aren’t. The data from the maven of bond research, W. Braddock Hickman, shows that junk debt outperforms high quality only in rare situations, because of the default risk.
In love, the data is even clearer. Stay with high-quality human beings. And once you find that you are in a junk relationship, sell immediately. Junk situations can look appealing and seductive, but junk is junk. Be wary of it unless you control the market.
(Or, as I like to tell college students, the absolutely surest way to ruin your life is to have a relationship with someone with many serious problems, and to think that you can change this person.)
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Research pays off. The most appealing and seductive (that word again) exterior can hide the most danger and chance of loss. For most of us, diversification in love, at least beyond a very small number, is impossible, so it’s necessary to do a lot of research on the choice you make. It is a rare man or woman who can resist the outward and the surface. But exteriors can hide far too much.
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In every long-term romantic situation, returns are greater when there is a monopoly. If you have to share your love with others, if you have to compete even after a brief while with others, forget the whole thing. You want to have monopoly bonds with your long-term lover. At least most situations work out better this way. ( I am too old to consider short-term romantic events. Those were my life when Lyndon Johnson and Richard Nixon were in the White House.)
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The returns on your investment should at least equal the cost of the investment. If you are getting less back than you put in over a considerable period of time, back off.
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Long-term investment pays off. The impatient day player will fare poorly without inside information or market-controlling power. He or she will have a few good days but years of agony in the world of love.
To coin a phrase: Fall in love in haste, repent at leisure.
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Realistic expectations are everything. If you have unrealistic expectations, they will rarely be met. If you think that you can go from nowhere to having someone wonderful in love with you, you are probably wrong.
You need expectations that match reality before you can make some progress. There may be exceptions, but they are rare.
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When you have a winner, stick with your winner. Whether in love or in the stock market, winners are to be prized.
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Have a dog or many dogs or cats in your life. These are your anchors to windward and your unfailing source of love.
Ben Franklin summed it up well. In times of stress, the three best things to have are an old dog, an old wife and ready money. How right he was.
THERE is more that could be said about the economics of love, but these thoughts may divert you while you are thinking about your future.
And let me close with another thought. I am far from glib about the economy. It has a lot of pitfalls facing it. As workers and investors, we know that many dangers lurk in our paths.
But so far, these things have always worked themselves out and this one will, too. In the meantime, they say that falling in love is wonderful, and that the best is falling in love with what you have.
Ben Stein is a lawyer, writer, actor and economist.
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Meantime folks, I am going offline for about 10 days (no, no, not on strike again, just investing in time with the kids). If I get near a computer, may be tempted to post something. Otherwise see you again in early August!
Dear Marina,
ReplyDeleteLove is GREAT and when you have a winner, stick with your winner. Whether in love or in the stock market, winners are to be prized.
What about love in the politcal arena? Are winners to be prized and are we going to stick with the winner if he/she is found to be incompetent in running the country?
Anyway, here is a video clip regarding who will be the winner in "The Prime-Minister-In-Waiting Competition". Enjoy watching the acts of the contestants in the competition. Judge who will be the winner then....
The Link: http://halfboileggs.blogspot.com/2008/07/prime-minister-in-waiting-competition.html
When you 'Can't Buy Me Love'
ReplyDeleteShare only with what you've got
When you're in need of eternal love
You need to turn to everlasting God
(C) Samuel Goh Kim Eng - 200708
http://MotivationInMotion.blogspot.com
Sun. 20th July 2008.
Dear MM,
ReplyDeleteI'm posting this article on my own blog for my friends viewing since some of them are quite in a crisis when it comes to love ;)
Thx for sharing this!!
Enjoy your time with the kids ;)
Kak,
ReplyDeleteHope you have a good quality time with the kids. Take care.
Adios
interesting that economics and love are similiar in most of the ways,
ReplyDeleteu always share these interesting stuffs, good one ;)
have a good break with the kids!!
Beautiful post... i do hope you have a blast of quality time with your children and family.
ReplyDeleteIn the time of crisis, we can loose anything but not our family or loved ones who will stand by our sides and encourage us to be strong. Thank you for reminding me that.
Ps: Going to miss your quirky posts!
Dear Datin Paduka,
ReplyDeleteYou've been on a whining spree and now see it fit to complain that "since everyone's been huffing and puffing so much about my recent posts", you've decided to take time-out.
Good. Keep up your strike. Can’t stand the heat, then get out from the kitchen. But of course you don't need to take brickbats like other ordinary bloggers in the kitchen; you've got a cook in your employ, right?
And yes, do pls consider giving the public fewer doses of your hypocrisy. Only your fawners -- plenty of them here I can see -- will miss you. But your audience is just about as genuine as you are.
MM,
ReplyDeleteThe returns on your investment should at least equal the cost of the investment. If you are getting less back than you put in over a considerable period of time, back off.
For married couple, do they need to back off and let go thier partner when in the middle, the children are stucked?
Does the golden rule in investment of "spreading one's eggs" apply in love? ;-) (pun totally not intended)
ReplyDeleteHave a great time with the kids. Do indulge and pamper yourself too.
ReplyDeleteLove is being able to give up being right even though you know you are @ beralah.
Does the golden rule in investment of "spreading one's eggs" apply in love? ;-) (pun totally not intended)
ReplyDeleteDear Sambal Muncha,
The greatest investor of this era Warren Buffett puts all his eggs in one basket. He is a winner, so i guess variety are for commoners. LOL
Econs and love....it's brilliant!
I’m spreading the below article from The Edge Daily which I find most revealing. Simple and makes sense. Please read and let’s all return back to using our minds (instead of just “Saya sokong”, “Saya sokong”, justice and righteousness.
ReplyDeleteSeparate politics from economic management
By R B Bhattacharjee
Recent events involving leaders on both sides of the political divide are uncanny enough to stop people in their tracks. The first-ever US presidential-style debate between Pakatan Rakyat (PR) leader Datuk Seri Anwar Ibrahim and Information Minister Datuk Shabery Cheek last Wednesday, that had the startling PR theme “If we form the government today, we’ll reduce the oil price tomorrow”, suggests an impatience on the opposition coalition’s part to take over the helm of the nation. The signal that change may be in the air is surely not lost on the business community too.
The next day, further confirmation that all is not well in the political sphere came when Anwar was arrested by police in response to a sodomy report lodged by a former party volunteer. More precisely, the SWAT-style interception of Anwar’s car by balaclava-clad police personnel in a convoy is not exactly the usual reaction to a sexual offence report. The strenuous explanations of the Home Minister and a senior police official, and the ruckus in Parliament over the arrest, all make the political point too obvious.
These developments, and many lesser tremors over the past several weeks, have generated a cloud of uncertainty over the political landscape. The message it bears for business is “wait and see”.
Naturally, therefore, Malaysia has been pushed to the side of investors’ radar screens, together with Thailand, which is in the midst of political churn as well.
One weakness in the current governance environment in Malaysia is the overly powerful effect of political developments on the conduct of economic affairs. This is to be expected due to the unbroken hold that the same political parties have had over the federal government since Independence five decades ago. Now, however, the time has come for the administration to be separated from the economic management of the country. This is a journey towards good governance that we have to take. There are lessons in this regard that can be drawn from the experience of our neighbours.
During the 21 years of Ferdinand Marcos’ rule over the Philippines, more schools, hospitals and infrastructure were built than in the tenure of the nine presidents who preceded him. Much of this was accomplished through hundreds of millions of dollars in aid from the US, which Marcos and his cronies unabashedly tapped for personal gain. The extent of the kleptocracy was so huge that till today no one is able to accurately estimate how many billions have been salted away.
The excesses of the Marcos regime finally led to his overthrow in the spectacular People’s Power uprising of 1986. Ironically, after the dictator was deposed, the political situation became highly fractious. Not surprisingly, some became nostalgic for the orderly if heavy-handed government of his era, when the citizenry was law-abiding and disciplined.
Since the March 8 general election, Malaysia has entered a new phase of democracy that is tending to become rather turbulent. While there is a vast difference between the Philippines, which Marcos had to flee, and the political climate in Malaysia today, it is clear that the Barisan Nasional (BN) government is being challenged in unprecedented ways. The contest for the people’s support between the BN and the nascent PR has led to exposés involving land deals to charges of questionable use of representatives’ allocations and even an attempt to file a no-confidence motion against the prime minister and his government.
Clearly, this is a time for some honest reckoning to take place.
When economic mismanagement left the Filipinos with empty rice pots, they began to look overseas for jobs and incomes that their government had failed to provide. The well-educated and urbane Filipina domestic maids who are a familiar feature in many Malaysian households are testimony to this failure of development to meet the people’s basic right to a livelihood.
The Philippines is also the largest supplier of maritime crew in the world, partly because a Filipino seaman can earn up to 500 times his local wages if he manages to get out of his country. So powerful is this incentive that impoverished rural youth go to great lengths to secure a certificate from the many maritime training centres in the Philippines.
However, shipping lines that employ these “instant” crew have found that their skills are extremely suspect, resulting in a high rate of accidents and indiscipline among them. Indeed, the credentials are so dodgy that international liners have set up maritime institutes of their own in the Philippines to ensure that their graduates measure up to the required standards.
Malaysia appears to be a long way from such a situation, but if its people are not to land in the same boat one day, governance authorities in both the public and private sectors need to uphold a strict code of accountability.
Hey MM,
ReplyDeleteGreat post. Never knew that economics and love could go hand in hand.
Especially like the phrase on 'realistic expectations'. I guess this relates to rational expectations in economics.
Marina, since you won't be around...and the economics - well this Al is the donkey's Change Now team on climatology and ecology:
ReplyDeleteIs Al Gore Inching Toward Solartopia?
By HARVEY WASSERMAN
Bit by bit, Al Gore seems to be inching toward a Solartopian view of a future that must be completely sustainable in green energy. This week he advocated getting to an electric power system that is "carbon free" within ten years.
This is an important step toward the mainstream for the decades-long social movement for a totally green-powered Earth. It comes alongside the equally telling move by oil baron T. Boone Pickens to invest $2 billion in wind power...
You want change?
Vote Abdullah Badawi for President of USA not UMNO! and NOT OBAMA.
Is Obama the catalyst for the economics of love, Marina?
Marina, i forgot about the falling in love thing - freddie and fannie is falling:
ReplyDeleteFannie’s and Freddie’s free lunch
By Joseph Stiglitz
Published: July 24 2008 18:25 | Last updated: July 24 2008 18:25
Much has been made in recent years of private/public partnerships. The US government is about to embark on another example of such a partnership, in which the private sector takes the profits and the public sector bears the risk. The proposed bail-out of Fannie Mae and Freddie Mac entails the socialisation of risk – with all the long-term adverse implications for moral hazard – from an administration supposedly committed to free-market principles.
Defenders of the bail-out argue that these institutions are too big to be allowed to fail. If that is the case, the government had a responsibility to regulate them so that they would not fail. No insurance company would provide fire insurance without demanding adequate sprinklers; none would leave it to “self-regulation”. But that is what we have done with the financial system.
Even if they are too big to fail, they are not too big to be reorganised. In effect, the administration is indeed proposing a form of financial reorganisation, but one that does not meet the basic tenets of what should constitute such a publicly sponsored scheme.
First, it should be fully transparent, with taxpayers knowing the risks they have assumed and how much has been given to the shareholders and bondholders being bailed out.
Second, there should be full accountability. Those who are responsible for the mistakes – management, shareholders and bondholders – should all bear the consequences. Taxpayers should not be asked to pony up a penny while shareholders are being protected.
Finally, taxpayers should be compensated for the risks they face. The greater the risks, the greater the compensation.
All of these principles were violated in the Bear Stearns bail-out. Shareholders walked away with more than $1bn (€635m, £500m), while taxpayers still do not know the size of the risks they bear. From what can be seen, taxpayers are not receiving a cent for all this risk-bearing. Hidden in the Federal Reserve-collateralised loans to JPMorgan that enabled it to take over Bear Stearns were almost surely interest rate and credit options worth billions of dollars. It would have been easy to design a restructuring that was more transparent and protected taxpayers’ interests better, giving some compensation for their risk-bearing.
But the proposed bail-out of Fannie Mae and Freddie Mac makes that of Bear Stearns look like a model of good governance. It sets an example for other countries of what not to do. The same administration that failed to regulate, then seemed enthusiastic about the Bear Stearns bail-out, is now asking the American people to write a blank cheque. They say: “Trust us.” Yes, we can trust the administration – to give the taxpayers another raw deal.
Something has to be done; on that everyone is agreed. We should begin with the core of the problem, the fact that millions of Americans were made loans beyond their ability to pay. We need to help them stay in their homes, including by converting the home mortgage deduction into a cashable tax credit and creating a homeowners’ Chapter 11, an expedited way to restructure their liabilities. This will bring clarity to the capital markets – reducing uncertainty about the size of the hole in Fannie Mae’s and Freddie Mac’s balance sheets.
The government should set a limit to the size of the bail-out, at the same time making it clear that, while it will not allow Fannie Mae and Freddie Mac to fail, neither will it be extending a blank cheque. There may need to be a drastic reorganisation. There should be a charge for the “credit line” (any private firm would do as much) and, given the risk, it should be at a higher than normal rate.
The private sector knows how to protect its interests; the government should do no less. As long as the credit line is extended, no dividends should be paid. To ensure that the government is not simply bailing out creditors who failed in due diligence, at least, say, 25 per cent of any notes, loans or bonds coming due that are not lent again should be set aside in an escrow account, to be paid only after it is established that taxpayers are not at risk. Any government loans should be cumulative preferred debt: the taxpayers get paid before any other creditors receive a dime. To discourage moral hazard the interest rate should be at a penalty rate and, reflecting the rising risk, increase with the amount borrowed. Finally, the government should participate in the upside potential as well as the downside risk: for instance, by taking shares (which it might later sell) or, as it did in the Chrysler bail-out, warrants.
We should not be worried about shareholders losing their investments. In earlier years, they were amply rewarded. The management remuneration packages that they approved were designed to encourage excessive risk-taking. They got what they asked for. Nor should we be worried about creditors losing their money. Their lack of supervision fuelled the housing bubble and we are now all paying the price. We should worry about whether there is a supply of liquidity to the housing market, so that those who wish to buy a home can get a loan. This proposal provides the necessary liquidity.
A basic law of economics holds that there is no such thing as a free lunch. Those in the financial market have had a sumptuous feast and the administration is now asking the taxpayer to pick up a part of the tab. We should simply say No.
The writer, 2001 recipient of the Nobel Prize for economics, is university professor at Columbia University. He is co-author with Linda Bilmes of The Three Trillion Dollar War: the True Cost of the Iraq Conflict
Dear Marina,
ReplyDeleteThanks for this article. It is really useful.
Dear MM,
ReplyDeleteGoodness, people read a lot into your holiday plans.
This is a good article, but is it the same Ben Stein who recently fronted that awful 'documentary' smearing evolutionists as eugenicists?
Daniel
Hi...I'm back,
ReplyDeleteGuess it's worthwhile to have quality time with your family?
Love—A Fruit of God's Spirit
Just as timely rain on an orchard contributes to a good harvest, God's spirit can produce in receptive individuals qualities that the Bible describes as "the fruitage of the spirit." (Galatians 5:22, 23) Foremost in this fruitage is love. (1 Corinthians 13:13) But how do we obtain God's spirit? A vital way is through prayer. If we pray for God's spirit, he will give it to us. (Luke 11:9-13) Do you "keep on" praying for holy spirit? If you do, then its precious fruitage, including love, should become ever more manifest in your life.
However, there is another type of spirit that works in opposition to God's spirit. The Bible calls this "the spirit of the world." (1 Corinthians 2:12; Ephesians 2:2) It is an evil influence, and its source is none other than Satan the Devil, "the ruler of this world" of mankind alienated from God. (John 12:31) Like wind that whips up dust and litter, "the spirit of the world" stirs up hurtful desires that corrode love and cater to the weaknesses of the flesh.—Galatians 5:19-21.
People absorb that evil spirit when they expose themselves to materialistic, me-first thinking, to violent attitudes, and to the distorted and often perverted view of love that is so common in the world. If you want to grow in genuine love, you must firmly resist the spirit of the world. (James 4:7) Do not, however, trust in your own strength; call on Jehovah for help. His spirit—the most powerful force in the universe—can fortify you and give you success.—Psalm 121:2.
HapiBlogging to you my friend! Have a nice day!
ReplyDelete